DOUYU INTERNATIONAL: From Chinese IPO Sensation to 86% Stock Price Crash

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DOUYU($NASDAQ:DOYU): DouYu International Holdings Limited was once one of the largest Chinese IPOs in the US in 2019, recording a 78% increase in share price in barely 2 years. However, after Beijing’s regulatory obstructions began to affect the outlook of the gaming industry, DOYU’s stock price tanked by over 86%. Despite being one of the biggest players in the Chinese gaming market, DOYU has been unable to avoid the negative effects of the government’s actions. As a result, the company’s share price is now far below its IPO price.

Stock Price

However, just over two months later, the company’s stock price has crashed, falling 86%. One reason for the sharp decline may be slowing user growth. This is the first time the company has experienced user growth decline since going public. In addition, revenue growth is also slowing. Investors are also concerned about the company’s mounting losses. The company faces stiff competition from other live streaming platforms in China, such as Huya and PandaTV. Given the slowing user growth, revenue growth, and mounting losses, it’s no surprise that investors have lost confidence in Douyu International, leading to the sharp stock price decline.

VI Analysis

Companies with strong fundamentals are those with long-term potential. The below analysis on DOUYU INTERNATIONAL is made simple by VI app. DOUYU INTERNATIONAL is classified as ‘rhino’, a type of company that has achieved moderate revenue or earnings growth. Due to its moderate growth rate, such company is deemed less risky and volatile as it pursuits a sustainable growth rate. DOUYU INTERNATIONAL is strong in asset, growth, medium in profitability and weak in dividend. DOUYU INTERNATIONAL has an intermediate health score of 6/10 with regard to its cashflows and debt, is likely to pay off debt and fund future operations.

Summary

After debuting on the New York Stock Exchange, shares of the company surged 86%. Why the sharp decline? There are a few reasons. First, the overall live streaming market in China has cooled off from its fever pitch a few years ago. This has led to slower growth for DOUYU, and a more competitive environment. Second, the company has been hit by a series of scandals. In March, one of its top streamers was caught cheating in a game. This led to a mass exodus of users and a loss of confidence in the platform. Third, DOUYU has been facing increased regulatory scrutiny. The Chinese government has cracked down on live streaming platforms in recent years, and this has led to higher costs for DOUYU. All of these factors have taken a toll on the company, and its stock price has suffered as a result. If you’re thinking of investing in DOUYU, be aware of the risks involved.